The sell-off in global technology hardware stocks continued on Thursday, with Asian chip manufacturers following the decline on Wall Street. This was due to market concerns about further interest rate hikes by the Federal Reserve, as well as issues related to financing for artificial intelligence investments weighing on sentiment.
South Korean chip giant SK Hynix once fell by more than 10%, while its competitor Samsung Electronics fell by 7.1%. Other South Korean chip-related stocks also came under pressure. LG Innotek fell by 8.1%, Seoul Semiconductor fell by 7.7%, and Samsung SDI fell by 6.8%.
In Japan, technology investment giant SoftBank Group fell by 7.9%. Semiconductor testing equipment manufacturer Advantest dropped by 6.9%, and chip manufacturing equipment supplier Tokyo Electron fell by 5.4%. Renesas Electronics also fell by 5.4%.
As investors become increasingly concerned that higher borrowing costs may impede the large-scale capital expenditures required for building AI infrastructure, tech companies are under pressure. These companies have previously benefited from the boom in AI investment.
The CEOs of Broadcom and Intel warned on Monday that financing could become a major obstacle to the AI craze. Broadcom's Hock Tan indicated that this might pose a greater challenge to AI expansion than chip or power shortages.
This sell-off came shortly after a weak session on Wall Street on Wednesday, when tech stocks led the market down. The reason was that higher-than-expected U.S. inflation data exacerbated market concerns about the Federal Reserve possibly raising interest rates further.
The Nasdaq Composite Index, which is dominated by technology stocks, fell by 1.88% to close at 26,692.87 points; the S&P 500 Index fell by 1.11% to close at 7,718.94 points; the Dow Jones Industrial Average fell by 0.09%.
Tech analyst Dan Ives from Yorkville Ives stated that as the yield on U.S. Treasury bonds rose above 5%, the latest round of selling in AI-related stocks reflects the growing concerns of the market regarding the financing costs of large-scale infrastructure projects. However, he added that the underlying demand for AI computing power remains strong.
"Higher yields have increased the financing costs of these projects. It is right for investors to pay attention to the balance sheets and contract structures, but interest rates are a financing issue, not a demand issue," said Ives in a report.
Ives indicates that the latest pullback provides an opportunity to buy, and it is stated that despite rising concerns about financing costs, the AI infrastructure boom is still in its early stages.
"What changes our perspective are demand signals, not interest rate signals," he said, pointing out that reductions in capital expenditure plans by hyperscale cloud service providers, cancellation of contracts, or declines in GPU rental prices are the signals that require vigilance.
